Pressure on for income tax hike

Is there an income tax increase in the future for St. Joseph County residents?

Some say it will be difficult to put together local government budgets for 2009 without additional revenue.

The deadline for finalizing the budgets is the end of September; meantime, the pressure to increase local income taxes appears to be greater than ever.

New estimates show that local governments will lose much more revenue than originally thought to property tax reform.

“I think it’s going to be fair to put some burden back on the legislature if there are enormous unexpected consequences,” said South Bend Common Council member Dr. David Varner.

For instance, when Indiana lawmakers passed a property tax reform package back in March, state estimates showed that the City of South Bend would lose $11.4 million in property tax revenue to its general and park funds. Seeking a second opinion, the city hired a private accounting firm to conduct a more in depth study of the impact of property tax reform. The private study pegged the lost revenue at $16.6 million.

In March, state estimates showed that St. Joseph County government stood to lose $4.3 million to property tax reform. A private study has now estimated the county’s losses at $7.5 million.

The situation appears to put more pressure than ever on local officials to consider raising local income taxes.

“I think the different option tax scenarios that we have been given by the state I think it’s inevitable that we must talk about them,” said St. Joseph County Council President Raphael Morton. “We have to discuss those issues. If we don’t, I don’t know what else we will do. We’ll probably have to shut the county down.”

In light of the size of a layoff that would be needed to accommodate the lost revenue, Morton says it would be impossible to continue services.

“We don't have a specific proposal to make at this point,” said South Bend Mayor Stephen Luecke, but he say “it would be difficult to make it without some additional revenue in 2009.”

Mayor Luecke added that “St. Joe County is the 10th lowest
county in the state for local income taxes.” St. Joseph County’s local income tax stands at .08 %, while Elkhart County’s is at 1.5%.

“If there is discussion about additional local income taxes,” said Luecke, “certainly the public safety tax is one that will be first and foremost from me, in terms of being able to support full staffing for our police and fire departments.”

The public safety tax would amount to a quarter of one percent, with the proceeds devoted to paying for public safety. Communities that choose to impose the public safety tax must also pass an additional quarter percent income tax that is devoted to lowering property taxes.

St. Joseph County also has the option of increasing its existing Economic Development Income Tax by .02%, although the deadline for doing so is the end of July.

At least one South Bend Common Council Member feels there is no need to consider an increase in local option taxes this year. “The discrepancy appears to be somewhere in the neighborhood of six million dollars,” said Dr. David Varner. Varner believes the city could absorb such a sum with budget cuts and delays in capital spending.

“It won’t be always easy, and I don’t think it would be something that you’re going to be able to do every year,” said Varner. “But the shortfall this year appears to be something that can be managed.”

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